High-Interest Loan Assistance: A Life-and-Death Crisis

Ask AI · How Will New Regulations Reshape the Lending Industry Ecosystem?

Reporter Chen Zhi

On March 16, Xing Qiang received an urgent task — to adjust the business system in accordance with the requirements of the “Regulations on Clear Disclosure of Comprehensive Financing Costs for Personal Loan Business” (hereinafter referred to as the “Regulations”) jointly issued by the China Banking and Insurance Regulatory Commission and the People’s Bank of China on March 15.

As the technical director of a medium-sized lending platform, Xing Qiang admits that the technical difficulty of completing this task is not high. “But, the impact of the new regulations on the lending industry is extremely profound,” he said. After the implementation of the new rules in August, high-interest lending businesses with annualized rates exceeding 24% will become unsustainable.

Regarding the current scale of high-interest lending, Xing Qiang said that there are no precise industry statistics, but based on peer exchanges and incomplete data, the scale of high-interest lending still amounts to 300 billion to 400 billion yuan, about 10% of the personal internet loan market.

On March 13, the China Banking and Insurance Regulatory Commission issued a notice stating that, in response to issues in internet lending, it held interviews with the operators of five platforms including Fenqile, Qifu Borrow, Niwo Loan, Yixianghua, and Credit Fei. The interviews required platform operators to strictly regulate marketing and promotional activities, clearly disclose loan product fee information, strictly follow personal information protection regulations, conduct collection activities legally and compliantly, establish effective customer complaint mechanisms, and protect the legitimate rights and interests of financial consumers.

An insider from a lending platform said that the main goal of these interviews was “reducing customer complaints.” Moving forward, they will strictly follow regulatory requirements, protect financial consumers’ rights, and significantly reduce customer complaints.

He admitted that from the interviews to the issuance of the Regulations, relevant authorities are adopting a combination of regulatory measures to further standardize the personal internet loan market.

Multiple sources indicate that the lending industry is undergoing a series of new changes: some small and medium banks and licensed consumer finance companies are urgently requiring lending platforms to contribute additional guarantee deposits to share the risk of bad debts in high-interest lending.

Xing Qiang said that the survival space for small and medium lending platforms is shrinking day by day.

The End of High-Interest Business

Since last year, regulators have intensified efforts to crack down on high-interest lending activities.

On October 1, 2025, the China Banking and Insurance Regulatory Commission officially implemented the “Notice on Strengthening the Management of Commercial Bank Internet Lending Business and Improving Financial Service Quality.” The notice states that commercial banks should fully and accurately understand the actual charges of credit enhancement service providers, ensure that the total financing costs paid by borrowers for a single loan comply with relevant regulations such as the “Opinions of the Supreme People’s Court on Further Strengthening Financial Trial Work,” and effectively safeguard borrowers’ legal rights.

According to this, the comprehensive financing cost (loan interest + credit enhancement service fee + related service fees) corresponding to the loan must not exceed an annualized rate of 24%.

In practice, however, high-interest lending has been difficult to eliminate. Many platforms continue to lock the annualized rate between 24% and 36% through models like “24%+权益” (benefits) and e-commerce installment plans.

“Benefits” mainly fall into two categories: one related to credit limit increases, loan rate adjustments, and quick disbursements, called “big benefits”; the other related to local lifestyle consumption, called “small benefits.”

Sources reveal that the reason some platforms “bend the rules” is because they have found gray operational space.

First, platforms use technical means to have borrowers sign separate contracts for loans, guarantees, and loan services. Only after all three are signed do they show all interest and fee details. Even if borrowers notice the annualized rate exceeds 24%, they can only passively accept it, allowing platforms to “cover up”.

Second, platforms manipulate the weighted annualized rate setting of loans. They adopt a “high-low pairing” approach, ensuring the overall weighted annualized rate does not exceed 24%, while still engaging in high-interest lending. In 2025, they are focusing on larger loans with lower interest rates, such as car and house mortgage loans, to lower the overall weighted annualized rate and create space for high-interest operations.

In the second half of 2025, Xing Qiang’s platform’s car mortgage (and house mortgage) loans accounted for less than 15%, with annualized rates below 8%, pulling the overall weighted rate down to 23.5%. Despite this, high-interest lending still made up about 25%. The new Regulations effectively “patched” these gray areas, making such practices difficult to sustain. The Regulations require lenders to display a clear “Disclosure of Comprehensive Financing Costs” form, including the principal amount, itemized interest and fee items (interest rate, other fees, guarantee-related fees), their standards, annualized rates, and the collecting entities. Borrowers must see this before signing the loan or installment agreement.

Financial analyst Wang Pengbo from Botong Consulting said that the Regulations directly block the space for lending institutions to obscure true financing costs through fee splitting and opaque charges, compressing unreasonable fee practices and promoting industry compliance and cost transparency.

Several insiders told reporters that the Regulations will make high-interest lending practices completely unviable, forcing many to exit the market.

Since March 16, Xing Qiang has spent considerable time adjusting existing systems, reworking the entire internet loan application–approval–signing–disbursement process. Particularly, before borrowers sign contracts, the system must display a “Disclosure of Comprehensive Financing Costs” form via pop-up window, clearly presenting all fee standards, fee subjects, and the total annualized rate, with at least 15 seconds of mandatory reading.

“He said, ‘System adjustments and reliability testing must be completed before August to ensure future operations comply with the new rules.’”

A draft of the “Disclosure of Comprehensive Financing Costs” form designed by a lending platform based on the Regulations shows it includes the loan principal, fee items (interest, other fees, guarantee fees), their standards, annualized rates, and the collecting entities; the overall annualized financing cost; and potential costs in default or misuse scenarios, so borrowers can fully understand each fee item and the overall rate.

Xing Qiang said that under these conditions, platforms will find it difficult to sustain high-interest models like “24%+ benefits” and “e-commerce installment plans.” If platforms continue to violate regulations, regulators may require banks to suspend cooperation.

Controversies in Implementing the New Rules

Recently, inside his company, Xing Qiang’s team has been debating whether “small benefits” unrelated to the loan should be included in the comprehensive disclosure form and counted toward the overall annualized rate.

According to the Regulations, aside from explicitly disclosed costs, lenders and their partners cannot charge any other interest or fees related to the loan.

The business team believes small benefits are not related to the loan interest and fees and can still be charged without being included in the comprehensive form or the overall rate. But risk control strongly opposes this, arguing that bundling small benefits with loans (requiring borrowers to purchase benefits before getting the loan) could be seen by regulators as “related to the loan” and should be included for safety.

Some proposed a compromise: instead of bundling, display small benefits prominently on the application page to encourage voluntary purchase.

However, past data shows that if small benefits are not bundled, the purchase rate drops below 1%, almost negligible and not generating income for platforms.

They are now waiting for final guidance from compliance authorities. To find a proper solution, they are researching how other platforms handle this and monitoring regulatory developments.

Zhang Lin, a director of operations at a lending platform, is more concerned about what happens if borrower defaults lead to penalties that push the overall annualized rate above 24%, causing complaints about “hidden high-interest practices.” How should they respond?

On March 18, the head of the post-loan management department approached Zhang Lin, warning that unresolved issues could trigger customer complaints.

Sources reveal that to control risk, platforms often set the maximum annualized rate at 24% for borrowers with lower credit scores (including guarantee and service fees). If penalties for overdue payments are included in the total rate, it could exceed the limit.

To address this, Zhang Lin recently held two meetings with business, risk control, and compliance teams. They are considering two solutions: one, lowering the loan’s annualized rate to around 22% to leave room for penalty interest within the 24% cap; two, when displaying the disclosure form via pop-up, adding a prominent warning: “Penalty interest may cause the annualized rate to slightly exceed 24%,” which borrowers must confirm before signing.

Compliance questions this approach: if regulators consider penalty interest as part of the total rate and restrict it to 24%, the second solution could be non-compliant.

Urgent Additional Bad Debt Guarantee Deposits

Unexpectedly, the new regulations have triggered a domino effect in the industry.

In the past week, two licensed financial institutions demanded urgent additional guarantee deposits: a small bank asked for a 5% deposit of the current lending amount within two weeks to share bad debt risk; another licensed consumer finance company required an immediate deposit of 1 million yuan, warning that if not received by the end of March, cooperation on high-interest lending would be suspended.

This is a preemptive move by licensed institutions to prepare for potential bad debts. Since borrowers with rates between 24% and 36% are often financially fragile, relying on “borrowing to repay old debts” to maintain liquidity, the space for high-interest lending is shrinking. If these borrowers cannot access new funds to pay old debts, default and bad debt risks will rise sharply.

“To maintain cooperation, some platforms have increased guarantee deposits, even some founders are personally funding these,” Zhang Lin said. His platform has promised to pay the new guarantee deposit by the end of the month.

Recently, his company decided to tighten collection efforts on high-interest loans.

He admits these are only stopgap measures. To survive long-term, platforms need to accelerate transformation—either go overseas or shift entirely to “below 24%” interest rates.

However, some small and medium platforms are running out of time.

Xing Qiang learned that many platforms with assets between 10 billion and 20 billion yuan, focused on high-interest lending, have halted operations.

Wang Pengbo said that the implementation of the Regulations will accelerate industry淘汰淘汰, with those relying on opaque fees, disguised charges, and high-cost customer acquisition losing competitiveness quickly. As cooperation thresholds with fund providers rise, the industry will concentrate resources among leading institutions with transparent pricing, strong risk control, and compliant disclosures, speeding industry cleanup.

(At the request of interviewees, Xing Qiang is a pseudonym.)